I’m a Financial Expert: Here Are 5 Tips for the Middle Class To Build an Emergency Fund

Every finance expert will tell you the same thing: having an emergency fund is vital for maintaining and growing wealth.

It’s a buffer against the unexpected and lets you sleep easier at night knowing you’re protected. It also keeps you from going into debt when a crisis hits.

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GOBankingRates spoke with Stoy Hall, certified financial planner and CEO of Black Mammoth , to discuss ways those in the middle class can build their solid emergency fund.

Read below for the steps he recommends taking :

Determine the Amount Needed

According to Hall, the first step in building an emergency fund is figuring out how much money you need to save.

“Traditionally, financial experts recommend setting aside three to six months’ worth of expenses.”

However, he said this can be adjusted based on your circumstances, such as your job security, health and personal comfort level with risk.

Create Your Buckets: Short-Term, Mid-Term, and Long-Term

To effectively manage your emergency savings, Hall explained that it’s helpful to divide your funds into different “buckets” based on when you might need access to the money.

“Your short-term bucket should cover immediate needs and emergencies. This includes expenses that arise within the first few months of losing your income or facing an unexpected bill.” Hall said. “ Keep three months’ worth in a regular checking or savings account for easy access. Place the remaining three months in a high-yield savings account to earn more interest without sacrificing liquidity.”

The goal, he said, is saving enough to cover six months of expenses. But allocation is also key. The mid-term bucket is for expenses that might come up between six months to a year.

“This money should be in a relatively safe and accessible account, but it can earn more interest than your short-term funds,” Hall said.

The goal, Hall explained, is to save an additional six to twelve months of expenses.

“ Use high-yield savings accounts, money market accounts or other low-risk investments to maximize your returns without exposing your savings to significant risk,” Hall said.

The long-term bucket is for expenses that might arise after a year. This money, he noted, can be invested in higher-risk, higher-return accounts because you have more time to recover from any market downturns. In this bucket, your goal is to save enough to cover one to two years of expenses.

“ Consider using a brokerage account to invest in stocks, bonds, or mutual funds. These investments have the potential for higher returns but should be chosen based on your risk tolerance and time horizon,” Hall said.

Set Up Automatic Deposits

Automating your savings is a powerful way to ensure consistency and discipline in building your emergency fund.

“By setting up automatic transfers from your checking account to your emergency fund buckets, you remove the temptation to spend the money elsewhere,” Hall noted.

Automating creates consistency, he added. “Regular, automatic deposits help you build your fund steadily without having to remember to transfer money manually.”

But more than that, it also fosters discipline and other psychological benefits.

“ Automation removes the temptation to skip a deposit or spend the money on non-essential items,” Hall said. “Seeing your savings grow consistently can boost your financial confidence and reduce anxiety about unexpected expenses.”

According to Hall, you can automate your savings in several ways. One way is by utilizing direct deposit.

“If your employer allows it, set up a portion of your paycheck to be directly deposited into your emergency fund accounts,” Hall said.

Another is setting up automatic transfers.

“Most banks and credit unions offer automatic transfer services. Set up recurring transfers from your checking account to your savings accounts on payday,” Hall said.

Apps and tools are a third way you can automate.

“Use financial apps that allow you to automate your savings. Some apps can even round up your purchases and save the spare change.”

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Adjust Accordingly

“Life is unpredictable, and your financial needs will change over time,” Hall said.

Regularly reviewing and adjusting your emergency fund is essential to ensure it remains adequate for your circumstances.

You’ll also want to adjust to life changes. For example: income changes like receiving a raise, promotion, or changing jobs — means you should adjust your savings rate to reflect your new income level. Then, you’ll also want to consider any changes to your expenses.

If your monthly expenses increase (e.g., due to a new child, moving to a more expensive area, or taking on new debt), Hall said it’s necessary to increase your emergency fund contributions accordingly. Keep in mind that your age and stage of life all factor in.

“As you get older, your financial priorities and risk tolerance may change. Regularly reassess your emergency fund to ensure it aligns with your current life stage and goals,” Hall said.

Have Fun Money

Finally, Hall said it’s important to balance saving with enjoying life.

“Set aside some money each month just for fun. This way, you’re more likely to stick to your budget and feel good about your savings plan.” Hall said. “Remember: Building an emergency fund is a journey, not a race. Save wisely, live fully, and adjust as you go!”

This article originally appeared on GOBankingRates.com : I’m a Financial Expert: Here Are 5 Tips for the Middle Class To Build an Emergency Fund